REPORT TO COUNCIL AND SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF SANTA CLARA
SUBJECT
Title
Action on Resolutions Approving a Purchase and Sale Agreement and Other Documents as Necessary Related to the Sale of the Great America Theme Park Parcels located at 1 Great America Parkway [APNs: 104-42-014 and 104-42-019]
Report
BACKGROUND
California Redevelopment Dissolution Laws require the Successor Agency to sell all of its assets pursuant to a Department of Finance approved Long Range Property Management Plan (LRPMP). The Successor Agency has sold several parcels as required by law including: Santa Clara Gateway Parcel #2, Santa Clara Hilton, and the North South parcel. Proceeds from the sale of assets were first used to retire Successor Agency debt, and once all debt was retired, land sale proceeds are now being distributed to taxing agencies.
The Successor Agency owns approximately 112 acres of land located at 1 Great America Parkway (Property) [APNs: 104-42-014 and 104-42-019]. The Property is encumbered by a long term ground lease with Cedar Fair Southwest (Tenant) and currently being utilized as the Great America Theme Park (Park) and a portion of the surface parking for the Park.
The Ground Lease was first executed by the Redevelopment Agency in 1989 and has been amended four times since. Shortly following the announcement of dissolution of redevelopment, the former Redevelopment Agency transferred ownership of the Property to the City. The most recent amendment, the 4th Amendment to the Ground Lease, was executed by the City with an effective date of January 2012, just prior to the dissolution of redevelopment agencies on February 1, 2012. Following litigation with the County of Santa Clara, Santa Clara Unified School District and other taxing entities, the City transferred ownership of the Property back to the Successor Agency.
The existing Ground Lease provides for several terms of note:
• The remaining term of the lease plus extensions is approximately 56 years (2074).
• The principal parking field for the Park is on property owned by the City of Santa Clara (Main Lot). The Ground Lease allows parking on the City’s property for the benefit of the Park during the remaining term of the Lease.
• The Ground Lease provides that the Main Lot would be reconfigured to accommodate not less than 6,500 parking spaces with a goal of providing 7,000 parking spaces.
• The Successor Agency provides the Tenant with access and use of an electronic billboard sign located off Interstate 101. The easement over private property for the sign and the electronic sign itself are owned by the Successor Agency. (There is currently an agreement with a third party for the operation of the sign)
• Tenant has a right to match any offer made for the purchase of the land (First Refusal Purchase Rights).
In July 2018 the Successor Agency’s broker, Eastdil Secured, commenced marketing the site to potential buyers. In September 2018, two bidding rounds were conducted. At the conclusion of the second round of bidding, potential buyers were requested to provide the Successor Agency with a sealed bid with their highest and best offer.
Bids from four firms were opened on September 25, 2018. The highest bidder, submitted an offer with a purchase price of $158,000,000 but required many modifications to the form Purchase and Sale Agreement including an extended due diligence period; and continued use of the Main Lot beyond the Theme Park lease. In consultation with the Oversight Board Subcommittee, after several weeks of unsuccessful negotiations, the Successor Agency commenced discussions with the second highest bidder, iStar, at a purchase price of $150,250,000.
On November 1, 2018, iStar as Safety, Income & Growth Inc., executed a Purchase and Sale Agreement to purchase the Property. Pursuant to the terms of the Cedar Fair Ground Lease, the Successor Agency sent the Tenant a notice of the purchase offer triggering a thirty (30) day period for the Tenant’s First Refusal Purchase Rights.
On November 28, 2018, Cedar Fair Southwest provided a notice to the Successor Agency of its election to exercise its purchase option matching the principal terms of the iStar offer which has been negotiated into the attached Purchase and Sale Agreement.
DISCUSSION
Key terms of the proposed Purchase and Sale Agreement (Agreement) between the Successor Agency and Cedar Fair Southwest (Buyer) for the Property include:
Purchase Price: $150,250,000
Deposit: A deposit of $30,000,000 (Deposit) to be deposited into escrow, three days following the execution of Purchase and Sale Agreement. The Deposit will become non-refundable after the expiration of the Diligence Period.
Diligence Period: The later of three (3) days following the execution of the Agreement and March 28, 2019.
Closing: Closing to five (5) days following the expiration of the Diligence Period with three options to extent the closing date by 30 days each.
Billboard: Included in the transfer is the ownership of an easement for the electronic billboard located off Interstate 101 and ownership of the billboard itself.
Since neither the City nor the Successor Agency would have an ongoing property interest in the Theme Park property, the Buyer and the City staff have agreed that entering into a separate agreement regarding parking would provide more clarity on the parties’ respective rights and obligations in the future. The proposed Parking Agreement and Easement restates the rights already provided for in the Ground Lease and does not modify the terms. In summary:
• Cedar Fair will make annual lease payments to the City for use of the Main Lot and the North South lot. Rents are currently $29,923 for the North South Lot and $121,606 for the balance of the Main Lot.
• The parties acknowledge that there is a deficiency in the minimum number of parking spaces (6,500 parking spaces) on the Main Lot which may be further impacted by requirements under the Americans with Disabilities Act. The City and Cedar Fair agree that it will meet and confer to discuss potential alternate solutions.
In addition, the proposed Sign Agreement would transfer the ownership of the easement and electronic sign from Cedar Fair (after the sale from the Successor Agency is complete) to the City of Santa Clara. All other terms regarding of the use of the sign would remain the same. Currently the time on the sign is broken out in the following manner:
• 50% Sign operator (Digitron Media)
• 40% Great America
• 5% City/Convention Center
• 5% Public Service Announcements
The existing agreement for the operation of the sign between Cedar Fair and Digitron Media Inc. expires in 2022.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to the CEQA Guidelines section 15378(a) as it has no potential for resulting in either direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
The sale of Great America Theme Park Parcels will provide $150,250,000 in sales proceeds (less customary closing costs and broker fees) to the Successor Agency. Sales proceeds will be distributed to the taxing entities and the City of Santa Clara, as a taxing entity will receive approximately 10% of any sale proceeds.
COORDINATION
This report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. That the City Council acting as the governing board of the Successor Agency to the Redevelopment Agency of the City of Santa Clara adopt a Resolution approving the Purchase and Sale Agreement between the Successor Agency to the Redevelopment Agency of the City of Santa Clara and Cedar Fair Southwest, Inc. for the Great America Theme Park Parcels located at 1 Great America Parkway (APNs: 104-42-014 and 104-42-019) at a purchase price of $150,250,000 and authorizing the City Manager to execute all documents necessary, including minor modifying amendments, to implement the Purchase and Sale Agreement and close escrow.
2. That the City Council adopt a Resolution authorizing the City Manager to negotiate and execute a Parking Agreement and Easement for the Main Lot and a Sign Agreement for an electronic sign with Cedar Fair Southwest, Inc.
Staff
Reviewed by: Ruth Shikada, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Map
2. Purchase and Sale Agreement
3. Resolution - Successor Agency
4. Resolution - City